Fintech Oversight May Be Heading for Its PCI Moment

Anyone who has ever been through sponsor-bank due diligence knows there is a point where the process starts to feel less like risk management and more like competitive spreadsheet design.

One bank asks for your information security policy.

Another wants the policy, the most recent review, evidence of board approval, the person responsible for maintaining it, and three examples showing the policy actually works.

A third asks essentially the same thing using different terminology in row 237 of a workbook named something like Fintech_DD_Final_v12_REVISED.xlsx.

None of those banks is necessarily wrong.

They are responsible for understanding the risks created by their third-party relationships, and fintech partnerships can create plenty of them.

But the industry has a duplication problem.

Fintechs, payment companies, Banking-as-a-Service providers, processors, technology vendors, and other bank service providers routinely answer overlapping diligence requests for different institutions, even when many of the underlying questions are trying to establish the same basic thing:

Does this company have controls we can rely on?

That is why recent reporting that the FDIC is working with industry groups on the concept of an independent standards organization for fintechs and other bank service providers is so interesting.

The idea reportedly includes baseline standards and certification, with independent assessors evaluating whether firms meet those standards.

It is early.

It is not a finished regulatory regime.

It is not an FDIC-issued gold star.

But if the concept develops, fintech oversight may be heading toward something that looks surprisingly familiar to payments people.

Its own PCI moment.

The PCI Comparison Is Not Perfect. It Is Still Useful.

PCI created something the card ecosystem badly needed:

A common language.

Merchants, processors, service providers, acquiring banks, assessors, and card networks could point to a defined security standard and have a more structured conversation about what controls were required and how compliance was demonstrated.

PCI did not eliminate breaches.

It did not eliminate diligence.

It did not eliminate contractual responsibility.

It certainly did not eliminate arguments about scope.

But it created a baseline.

That baseline has enormous practical value.

Imagine a similar concept developing around fintech-bank partnerships.

Instead of every bank beginning at zero, an independently assessed fintech could potentially arrive with a standardized body of evidence around areas such as information security, business continuity, compliance management, operational resilience, data governance, access controls, vendor management, incident response, financial condition, reconciliation, or other core third-party risks.

The bank would still have work to do.

But maybe it would not have to rediscover the entire company from scratch.

That would be meaningful.

Bank Diligence Is Expensive on Both Sides

We spend a lot of time talking about the burden fintech diligence creates for fintechs.

The banks have a burden too.

A bank onboarding a fintech partner has to understand the business model, evaluate risk, review controls, assess management, understand vendors, examine cybersecurity, review compliance capabilities, identify operational dependencies, negotiate contracts, and build ongoing monitoring around the relationship.

That costs money.

It takes people.

It consumes legal, compliance, risk, technology, operations, audit, and executive resources.

If every potential partner arrives with a completely different control framework and evidence package, the bank has to normalize all of that internally.

A certification model could potentially create a cleaner starting point.

Did an independent assessor verify the baseline controls?

Is the evidence current?

Were issues identified?

Were they remediated?

What parts of the standard apply to this particular service?

Now the bank can spend more time on what is actually unique about the relationship instead of repeatedly proving that the fintech has basic controls.

That is where standardization could create real value.

Not by removing diligence.

By reducing waste inside diligence.

A Certificate Could Become the New Price of Admission

There is another side to this.

Once the industry develops a recognized certification, optional things have a funny way of becoming practically mandatory.

PCI is a good example.

Nobody building a serious payments service provider strategy says, "We're going to ignore PCI and see how sales goes."

Customers ask for evidence.

Processors ask for evidence.

Banks ask for evidence.

Contracts require evidence.

The ecosystem creates its own commercial enforcement mechanism around the standard.

Fintech certification could eventually work the same way.

A bank may say the certification is not technically required.

Procurement may still ask for it.

Risk may prefer vendors that have it.

Legal may add it to the contract.

The business team may realize the competitor already has it.

Suddenly the "voluntary" certification becomes table stakes.

For mature fintechs with strong control environments, that might be a good thing.

For early-stage companies, it could create a higher cost of entry.

That tradeoff deserves attention.

Standards can increase safety and efficiency.

They can also raise the minimum cost of participating in the market.

The Certificate Cannot Become the Control

This is where Steve's world gets involved.

Compliance documents are useful.

Operating controls are better.

A company can pass an assessment in January and create a new problem in March.

A new product launches.

A critical vendor changes.

Transaction volume triples.

The fintech enters a new market.

A support workflow changes.

A manual process becomes automated.

A compliance officer leaves.

An API begins passing data that was never included in the original assessment.

Controls are not static.

Businesses are definitely not static.

That means any useful fintech certification model needs to avoid becoming an annual ritual where everyone produces evidence, gets a badge, posts it on the trust center, and returns to normal until next year.

The certificate should tell a bank that someone independently tested a defined baseline.

It should not tell the bank that nothing can go wrong.

Those are very different claims.

PCI Shows Us What Good Standardization Can Do

The best part of the PCI analogy is not the checklist.

It is the shared responsibility model.

In payments, sophisticated companies understand that a PCI-compliant service provider does not automatically make the customer PCI compliant.

Responsibilities depend on architecture.

They depend on who stores, processes, transmits, or can affect payment data.

They depend on which controls the provider operates and which controls remain with the customer.

Fintech partnerships need the same discipline.

A certified fintech could demonstrate that it has baseline controls.

The sponsor bank would still need to understand how those controls interact with its own responsibilities.

Who performs onboarding?

Who owns transaction monitoring?

Who owns the ledger?

Who handles complaints?

Who reconciles funds?

Who manages suspicious activity escalation?

Who oversees downstream vendors?

Who retains evidence?

Who can stop the program when something goes wrong?

Certification can help prove capability.

It cannot define every responsibility inside every partnership.

Contracts and operating procedures still have to do that.

Synapse Is the Reason This Conversation Matters

The industry does not have to imagine what weak operational clarity can look like.

The collapse of Synapse made the consequences painfully visible.

Consumers lost access to funds. Banks, fintechs, middleware, ledgers, account records, and reconciliation questions became part of a complicated remediation process. The industry was forced to confront how much trust had been placed in interconnected systems without always having enough independent evidence to reconstruct what happened cleanly.

A certification standard cannot guarantee that another Synapse-type event never happens.

But it can force better questions earlier.

Does the provider reconcile customer funds consistently?

Can records be independently verified?

Is business continuity real?

Are downstream dependencies understood?

Can the partner produce accurate records during a failure?

Does the bank have enough visibility to monitor what the provider is doing?

What happens if the provider disappears tomorrow?

Those are not abstract compliance questions.

Those are "can customers get their money?" questions.

That is why the operational side of certification matters more than the badge.

Fintechs Could Actually Benefit From a Higher Bar

Fintech companies may look at another certification requirement and understandably think:

Fantastic. More compliance.

But there is an upside.

Good fintechs already spend enormous resources proving themselves repeatedly.

They answer security questionnaires.

They provide SOC reports.

They explain policies.

They submit penetration tests.

They produce business continuity plans.

They document AML and fraud controls.

They walk bank partners through architecture.

They answer follow-up questions.

Then they start over with the next institution.

A recognized standard could allow strong operators to reuse more of that work.

Instead of proving from scratch that your company has a real control environment, you could potentially begin the relationship with an independently verified baseline.

Then the bank's diligence could focus on the unique risks created by the actual program.

That is better risk management.

It is also better resource allocation.

But Sponsor Banks Still Own Sponsor-Bank Oversight

This is the part nobody gets to automate away.

Banks cannot simply collect a fintech certificate and call third-party risk management complete.

The bank still chose the partner.

The bank still needs to understand the relationship.

The bank still needs appropriate contracts.

The bank still needs ongoing monitoring.

The bank still needs to understand changes in volume, products, customer populations, risk, vendors, and operating models.

The bank still needs escalation rights.

The bank still needs evidence.

Certification could make the front end of that process much cleaner.

It cannot replace the process.

The same thing is true for fintechs.

Getting certified would not mean compliance now belongs to the assessor.

If your controls stop working, the certificate does not operate them for you.

If your reconciliation breaks, the certificate does not reconcile the funds.

If your security program fails, the certificate does not respond to the incident.

If your customer-support operation melts down, the certificate does not answer the phone.

The real operating model still wins.

What Fintechs Should Be Thinking About Now

This proposal is still early, so companies should not start building entire compliance programs around a standard that does not yet exist.

But they should pay attention to the direction.

If the industry is moving toward common baseline standards, fintechs can start asking whether their evidence is ready to be evaluated in a standardized way.

Are policies current?

Do controls match the policies?

Can the company prove the controls operate?

Are vendor relationships documented?

Is business continuity tested?

Is incident response tested?

Are financial and operational reconciliations reliable?

Are responsibilities with bank partners clearly mapped?

Can management demonstrate oversight?

Can issues be tracked from discovery through remediation?

Those are useful questions regardless of whether this particular certification effort ultimately becomes widespread.

Because strong controls should survive more than one bank questionnaire.

The Takeaway

The idea of a standardized fintech certification model could be a meaningful step for bank-fintech partnerships.

Done well, it could reduce duplicated diligence, create clearer baseline expectations, make independent testing more reusable, and let sponsor banks focus more attention on the unique risks of each program.

In that sense, fintech oversight really could be heading toward its PCI moment.

But PCI also gives us the warning.

Certification is evidence of a control environment.

It is not the control environment.

The fintech still has to operate safely.

The bank still has to perform oversight.

The contract still has to define responsibility.

The evidence still has to match reality.

And customers still need their money to be where everyone says it is.

If this model develops, the companies that benefit most will not be the ones that get best at passing another assessment.

They will be the ones that were already operating in a way that made the assessment boring.

In payments and fintech risk, boring is often exactly what you want.

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